Inventory control of spare parts using a Bayesian approach: A case study [An article from: European Journal of Operational Research]

This digital document is a journal article from European Journal of Operational Research, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper presents a case study of applying a Bayesian approach to forecast demand and subsequently determine the appropriate parameter S of an (S-1,S) inventory system for controlling spare parts of electronic equipment. First, the problem and the current policy are described. Then, the basic elements of the Bayesian approach are introduced and the procedure for calculating the appropriate parameter S is illustrated. We apply the Bayesian approach in an innovative way to specify the initial prior distributions of the failure rates of three types of circuit packs, using the initial estimates and the failure history of similar items. Based on these priors, we determine the distributions of demand for spare parts and finally we calculate the required stock levels for each type at several locations. According to the proposed method, a lower base stock than the one currently used is sufficient to achieve the desired service level.